Friday, May 2, 2008

Child poverty lobbyists are calling for higher welfare benefits and tax cuts for the lowest income earners in next month's Budget - and axing tax breaks for the middle class.

The Child Poverty Action Group, led by paediatricians and academics, wants to abolish tax subsidies for KiwiSaver and use the money to cut the bottom tax rate to 10 per cent on incomes of up to $20,000 a year.

Its wide-ranging report also calls for extending free primary healthcare for children to after-hours accident and medical clinics and extending the policy of 20 hours a week free childcare to services such as kohanga reo and playcentres, which are parent-led rather than teacher-led.

The whole package would cost more than $4 billion a year but that would be partly paid for by axing the KiwiSaver subsidies to save around $1 billion a year. The subsidies are expected to go mainly to middle-class families who can afford to save.

The net cost of around $3 billion would be about twice as much as the $1.5 billion which Finance Minister Michael Cullen has publicly earmarked for tax cuts in the Budget, but he is widely expected to deliver somewhat more than he has promised.

New Zealand came third-worst in the developed world in a Unicef survey of child poverty around the year 2000, with a quarter of all children then living in families earning less than 60 per cent of the median income.

The Government announced a goal in 2002 of "eliminating child poverty". But unlike Britain, which has vowed to end it by 2020, no target dates have been set here.

The action group says New Zealand should adopt the same target date of 2020 and define poverty as earning less than 60 per cent of the median - currently around $510 after tax a week for a single parent with two children or $630 a week for a couple with two children.

By comparison, benefits and family support currently pay only $403 a week to a sole parent with two children or $446 to a two-child couple.

Despite a dramatic decline in unemployment in the past decade, 212,000 children, or 23 per cent of all children, were in families receiving benefits last September. About 77 per cent were in families on the domestic purposes benefit, 14 per cent on sickness and invalid benefits and 9 per cent on unemployment and other benefits.

"The essential role access to a benefit plays in the lives of many New Zealand women and children has been highlighted by the Ministry of Social Development," the report said.

A ministry report found that almost one in every two mothers (46 per cent) by 1995 had been a sole parent at some time by the age of 50.

The group said the current tax bracket for the lowest tax rate of 15 per cent, up to incomes of $9500 a year ($183 a week), had not changed for 30 years.

It recommends cutting that rate to 10 per cent and/or raising the tax threshold to $20,000 ($385 a week), or some combination of the two.

The Labour and National parties both cautiously welcomed the report. Social Development Minister Ruth Dyson said Labour had made progress in reducing child poverty through Working for Families tax credits, cheaper doctors' fees and 20 hours of free early childhood education but there was still much to be done.

KEY PROPOSALS

* Pledge to end child poverty by 2020. (Why wait do it Now)* Raise benefits and family support to 60 per cent of the net median household income, adjusted for family size. (How about income so children are not living in poverty at all.)* Resurrect universal family benefit of $20 a week for all children under 5.* Extend $60 a week income-tested in-work tax credit to all families with children.* Cut the bottom tax rate to 10 per cent and/or extend the bottom tax bracket to $20,000.* Extend free primary health care for children under 18 to after-hours clinics. (How about 24 hours a day)* Extend 20 hours free childcare to parent-led centres such as playcentres and kohanga reo.* Abolish tax subsidies for KiwiSaver.